The production and use of chemicals in Europe has been regulated since the late 1960s, but for most of the life of the European Union ("EU"), there has been no central register recording the creation and/or importation of chemicals. In 1981, new legislation introduced a notification procedure requiring the provision of safety data. However, this affected only a small proportion of chemicals, meaning that the vast majority of chemicals made or transported in Europe, especially those produced in smaller volumes, have not been properly monitored in respect of safety.
Therefore, to address this deficiency, a new EU regulation for chemicals—the Registration, Evaluation, And Authorization Of Chemicals ("REACH")—is being introduced to replace the current regulatory system of some 40 EU Directives. REACH will come into force next year and will require the registration of thousands of chemicals produced and/or imported into Europe that have inherent environmental and safety risks. Producers or importers of chemicals in volumes of one ton or more per year and per producer/importer will have to register the chemicals with a new European Chemicals Agency (the "Agency") to be set up in Helsinki. While creating thousands of jobs in Finland, the legislation potentially will cost thousands of jobs in other countries. To facilitate the transition, registration deadlines (ranging from three to 11 years following the creation of the Agency) will apply to certain phase-in substances.
Some chemicals will be exempted from the scope REACH, for example, radioactive substances and non-isolated intermediates. Others, such as polymers, will be exempted from registration and evaluation, but may still be subject to authorization and restriction.
REACH distinguishes between chemicals used where they are manufactured and those which are transported. The registration requirements are higher for those transported in higher quantities.
REACH likely will impose a heavy cost burden on manufacturers and importers. It further is suggested in some circles that the regulation discriminates against smaller enterprises, particularly manufacturers from developing countries. The higher registration requirements for chemicals transported will result in preference for chemicals created in Europe.
For the manufacture and movement of substances in quantities of 10 tons or more, a chemical safety report ("CSR") must be prepared for registration. The CSR documents the hazards and classification of a substance, and describes exposure scenarios for specific
uses of substances that are classified as dangerous. These exposure scenarios must include the appropriate risk management measures and operational conditions that ensure that the risks from the uses of the substance are adequately controlled.
The high costs of this new regulation will also create barriers to entry in the chemical industry. One possible solution to this, proposed by the Commission, is the creation of a consortium/consortia of companies (manufacturers/importers) to collect information and carry out studies jointly for the purposes of sharing the burden of the costs of registration.
However, the creation of consortia leads to competition law concerns as it will necessarily involve cooperation between competitors. As registrations have to be done on an individual basis, this is likely to involve the exchange of information between competitors, and companies will have to be very careful about exactly what information is shared in such circumstances. Even if this process can be achieved without exchanging competitive information, there is still a risk that any prolonged cooperation may facilitate the entering into anti-competitive practices or exchange of confidential information further down the line. Furthermore, given that the consortium could be viewed as collectively dominant if it has a high market share, questions may arise whether the consortium must be open to all, and if so, how the costs of the consortium are to be shared.
Given the objectives of REACH, a carefully prepared consortium/consortia structure(s), with appropriate safeguards in place, could be a solution to the majority of chemical companies whatever their size. Reed Smith will continue to monitor the implementation of REACH and how it impacts current and future importers of chemicals into Europe.
This article is presented for informational purposes only and is not intended to constitute legal advice.
